Applying the margin scheme to a property sale

 The margin scheme is a way of working out the GST you must pay when you sell property as part of your business. You can only apply the margin scheme if the sale of a property is taxable.

The amount of GST you must pay on property sales is generally equal to one-eleventh of the sale price. Under the margin scheme, the GST is calculated on the difference between the sale price and your purchase price of the property (or the property’s value on 1 July 2000 if it was acquired before that date).

Use GST property decision tool in ATO website to work out if GST applies to your property sales. The tool was recently updated for easier use on mobile devices. It can be used to determine GST on the sale, lease or purchase of real property (including vacant land, residential and commercial premises).

Check your eligibility to use the margin scheme when selling property. To use the margin scheme you need to be registered for GST (or required to be registered for GST).

The application of GST to property-related transactions can be complex. Your registered tax or BAS agent can provide advice on GST treatment for property transactions.

Buying and selling your home

 Generally, you don’t pay capital gains tax (CGT) if you sell the home you live in (under the main residence exemption). You also can’t claim income tax deductions for costs associated with buying or selling your home.

But you should keep all the records relating to your home so that if things change – for example, you start to rent it out or otherwise use it to produce income (such as flipping the property) – you don’t pay more tax than necessary.

A second property, such as a holiday house or hobby farm, is subject to CGT.

Similarly, you’re not liable for goods and services tax (GST) when you sell your home and you can’t claim GST credits on any costs associated with buying or selling it (except in some circumstances where you’re in the business of building or renovating properties).

Some states charge stamp duty when you buy a property, including a home. Some states also levy land tax on land that exceeds a certain value, though the property you live in is usually exempt.

GST on low value imported goods

 From 1 July 2018 Australian goods and services tax (GST) will apply to sales of low value goods imported by consumers into Australia.

Businesses meeting the A$75,000 registration threshold will need to:

  • register for GST
  • charge GST on sales of low value imported goods (unless they are GST-free)
  • lodge returns with us.

These businesses may be merchants who sell goods, electronic distribution platform operators or re-deliverers. For goods imported in a consignment over A$1,000, any GST, customs duty and clearance charges will be charged to the importer at the border under existing processes.

This new law is designed so businesses:

  • will not charge GST on a sale when GST will be charged at the border, because an item is
    • worth over A$1,000
    • a tobacco product
    • alcoholic beverage
  • will not need to charge GST on a sale if it is clear that multiple goods will be shipped to Australia in one consignment worth over A$1,000, GST will be charged at the border instead.

Source: ATO website